Exports fell 9.71% in June, while imports declined 9.06% as US-China trade row hurt India’s trade prospects
DURING June, petroleum exports fell 33% as Jamnagar, Mangalore refineries shut temporarily
India’s merchandise exports contracted for the first time in nine months in June while imports shrank first time in four months, signalling that rising protectionism and trade tensions between the US and China are impacting India’s trade prospects as well.
Data released by the commerce ministry showed exports in June fell 9.71% to $25.01 billion while imports dipped 9.06% to $40.29 billion, leaving behind a trade deficit of $15.28 billion during the month.
Comparatively, China’s exports in June fell 1.3%, while imports shrank 7.3%, leading to a trade surplus of $50.98 billion, significantly higher than what analysts projected.
Commerce secretary Anup Wadhawan said the temporary shutdown of ONGC Mangalore Petrochemical Ltd and Jamnagar refinery for maintenance in June adversely impacted exports of petroleum products.
“The shutdown of Jamnagar refinery is likely to abate by mid-July. The fall in the global Brent price by 15.6% in June is also a factor in the declining value of petroleum product exports," he added.
During June, petroleum exports declined 33% while non-oil, non-gems and jewellery exports contracted by 4.86%.
Among other major items, exports of gems and jewellery (10.7%), readymade garments (-9.18%), chemicals (-8.17%) and engineering goods (-2.65%) also contracted.
“The negative growth in June is also consistent with certain global trends, which have impacted India’s exports in recent months. We expect exports growth to revive to the trend growth rate of 2-3% in coming months," Wadhawan said.
The World Bank in its Global Economic Prospects released in June has projected weakening of global trade in 2019.
Global trade is projected to grow at 2.6% this year—a full percentage point below its own previous forecast.
Aditi Nayar, principal economist at Icra Ltd, said lower crude oil prices explain a portion of the contraction in the absolute level of exports and imports.
“Nevertheless, the contraction in imports of items such as transport equipment, machinery and fertilisers should be viewed with caution, as they suggest that the underlying demand dynamics are weak.
The increase in customs duty on gold may curtail imports in the next few months, which would modestly shrink the size of the trade deficit," she added.
The escalating trade war between the US and China, and rising protectionism have cast a shadow on India’s prospects for higher exports.
In March, the World Trade Organization (WTO) projected trade growth to fall from 3.9% in 2018 to 3.7% in 2019. It had cautioned that these estimates could be revised downward if trade conditions continue to deteriorate.
The International Monetary Fund also cut the global growth forecast for 2019 by 20 basis points to 3.3%, the lowest since the 2008 financial crisis, blaming the US-China trade tensions, loss of momentum in Europe and the uncertainty surrounding Brexit.
The commerce ministry is contemplating an export promotion scheme, along with a production-based support scheme, to boost Make in India as part of its 100-day action plan.
The new export promotion scheme may replace the existing Merchandise Export from India Scheme, following the US decision to challenge India’s existing export subsidy schemes at the WTO.